DOLLAR RALLYING, ENERGY SLIPPING

On March 9, 2012 by TradingDesk
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A deal to swap out old Greek bonds for new Greek bonds was successful yesterday, and that made stock and commodity buyers happy. This morning, the ISDA is meeting to decide whether the forced action qualifies as a default event, which would trigger the huge amounts of insurance contracts purchased on this debt, which is the last hurdle to clear before we can stop watching Greek headlines for the week.

Energy prices were also boosted by rumors that US and Israeli leaders had worked out a secret deal on the timing of attacking Iran. The White House denied the claims, but traders apparently believed them.

The dollar is rallying this morning following the Non-Farm payroll report which showed 243,000 jobs added in January, and a seasonally adjusted unemployment rate at 8.3%, and U6 unemployment up 1% from December at 16.2%.

The strong dollar/weak euro combo is pushing energy futures fractionally lower this morning, although longer term direction is still unclear. Technical studies offer arguments for both bulls and bears, so we’ll go back to flipping coins to predict where the market will go.

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Risk Is Back On

On March 8, 2012 by TradingDesk
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Risk is back on this morning, as hope springs eternal that the Greeks have it figured out. Stronger than forecast manufacturing data out of Germany has the Euro rising nearly 1%, pushing the dollar lower and most stock and commodity markets are rallying along with it. A 3rd straight week of slight rises to initial unemployment claims in the US has tempered the move over the past 20 minutes, but most markets remain in the green.

Yesterday’s action was driven largely by a WSJ report suggesting that the FED had a new “sterilized” version of QE ready to inject the next dose of free money into the financial system. While the news is unsubstantiated, it does point clearly to the fact that FED policy may provide better market direction than anything, a full 3 years after their first round of Quantitative Easing in March of 09.

Energy prices used the stock rally to get back above their bullish trend lines, and have followed through with more modest buying today. Despite the bounce, technical studies are still in neutral territory, and there are potential Head and Shoulder topping formations in both products. Expect a choppy day of trading as the headlines from Europe continue to pour in.

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Oh What A Night

On March 7, 2012 by TradingDesk
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It’s been a quiet overnight session, as US and European markets lick their wounds after their worst day in 3 months. The ADP jobs report showed 216k private jobs added in February, which has helped futures bounce, taking back roughly 1/5th of yesterday’s losses.

Energy prices held up relatively well during yesterday’s blanket selling of risk assets, settling down less than 1% while most stock market indices were down 1.5-3%, suggesting that fears of supply disruptions continue to trump economic worries for now. Both RBOB and HO settled below their 3 month old trend lines, and their technical indicators have moved into neutral territory. From here, HO needs to break support at $3.17 or resistance around $3.23 to find further direction. RBOB has a wider range of consolidation between $3.20 and $3.30 that should contain trading until our next big move is found.

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Prices Stumble on Fresh Fears

On March 6, 2012 by TradingDesk
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We’re watching a “risk off” day unfold this morning, as global equity and commodity prices stumble on fresh fears of an economic slowdown – the Eurozone reported a contraction in Q4 GDP – and on concerns that despite 2 years of struggle, Greece may still end up in a messy default on its debt. The USD is rallying as investors seek safety.

Energy prices are down roughly 1%, with an Iranian olive branch – or stall tactic, take your pick – has temporarily eased concerns of imminent fighting stirred up by yesterday’s meeting between the US and Israel. The bull trends which have been in place for refined products since mid-December are breaking down this morning, although we still need to settle below these lines before we can celebrate the end of the run. Prices have moved so high so quickly, that there is little support on the charts until we drop another 10-20 cents, and with combined speculative long positions in the market at all-time highs, the selling could get furious if the fast money heads for the exits.

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Energy Prices Recovering

On March 5, 2012 by TradingDesk
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Energy prices are recovering this morning, after Friday’s furious sell-off which wiped out the 7-9 cent gains we had on Thursday. Technical studies are moving into neutral territory after remaining firmly in bullish favor over the past two months. Upward slanting trend lines are holding at the moment for both RBOB and HO however, so it’s too early to say that the 2012 spring rally has ended, in fact this would mark the earliest peak in gasoline prices in 30 years if we have topped out.

Global stock markets are largely in the red this morning after China cut its growth forecast by more than 1%, which disappointed many who’s forecasts rely on the unending emerging market growth. European headlines continue to worry investors, with a contraction in PMI readings, rumors of a new Irish bailout and a Greek default giving buyer’s pause.

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Bulls Still In Control, But Signs of Being Overbought Remain

On March 2, 2012 by TradingDesk
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It was a wild Thursday for energy prices, as technical momentum from Wednesday’s late rally was coupled with a rally in stocks that pushed contracts a nickel higher, only to see prices skyrocket after reports that a Saudi oil pipeline had exploded. WTI Crude spiked over $110, and Brent broke $128 before the Saudi’s released a statement denying the explosion. Gasoline prices were up 13 cents at their peak for the day. Although the event may turn out to be a non-issue, it did clearly show that the market is extremely sensitive to any supply shocks.

We are seeing some relatively modest selling today, largely driven by a plunging Euro as a host of new stories raise more questions about their financial system. Technically the bulls are still control of the action, but signs of being overbought remain. Energy Prices have correlated very strongly to stock prices over the past several years, and with the DJIA index having crossed 1300 more than 70 times in the past week and now trading below that level, it suggests that the energy markets may have to find their own direction for a while.

 CLICK HERE for a PDF of today’s chart

Gold down, bulls still control energy prices

On March 1, 2012 by TradingDesk
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Yesterday was a busy day for market moving headlines, with the highlight being FED Chairman Ben Bernanke throwing a wet blanket on financial markets by suggesting that QE3 wasn’t coming in his testimony before congress. Commodity and stock markets sold off sharply, with Silver and Gold making the most dramatic moves, down 7% and 5% respectively.

Energy commodities fared much better, bouncing off technical support levels midday and making a furious rally in the last 10 minutes of trade to make a clear point that bulls aren’t yet ready to give up control of fuel prices.

It’s another busy day for news, with weekly jobless claims unchanged at 351,000, consumer spending for January was unchanged for the 3rd consecutive month, and personal income and savings rates dipped slightly. The Bernank is testifying for a 2nd day as well, which will be watched closely for any sign that free money which has become the oxygen of financial markets since 2009, will be extended.

Today is the first day of trading for the low RVP RBOB contract, so don’t be scared by the 22 cent increase in futures prices. Looking forward, despite a nice selloff this week, we remain just 10-15 cents from our 2011 highs in refined products, and longer term technical studies continue to point higher.

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Energy Prices Knocked Back Into Reality

On February 29, 2012 by TradingDesk
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After settling at their highest levels since May of 2008, US Stock markets are poised to continue their run higher, following an initial GDP reading from Q4 that beat estimates, coming in at +3%. European markets are also rallying after the ECB completed a second refinancing program, injecting more than ½ Billion Euros into their struggling banking sector.

 

Energy prices have been knocked back into reality this week, as a lack of “supply fear” headlines has punished the record amount of long speculators that poured into the market in the past few weeks. European Brent crude oil and gasoil diesel have led US contracts lower, although technical support levels have not yet been tested. Today is the last day for March contracts, so all the action will be in April. On a related note, we will be celebrating Feb 29 with a screening of the Pirates of Penzance in the trading room this afternoon.

 

More Modest Pullbacks

On February 28, 2012 by TradingDesk
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Energy prices are pulling back modestly again this morning as warning cries of the economic damage caused by high fuel prices have reached a fever pitch, with many calls for government intervention being made. Given our market’s status as a political and social hot-button, it does seem likely that some action will be taken this year, with the most likely moves to be an increase in margin requirements on the exchange – making it more costly to trade in an effort to limit speculation – and potentially via another release of the Strategic Petroleum Reserve as was done last year during the Libyan conflict.

 

Fundamentally the US market remains amply supplied, and today’s big drop in January durable goods orders suggests that economic weakness is creeping back into the picture. Technically, energy contracts remain in a longer term bull trend targeting last year’s highs, and this week’s move appears to be nothing more than a natural correction to a larger move higher.

 

A Modest Monday Selloff

On February 27, 2012 by TradingDesk
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Most financial markets are seeing modest selling this morning, as disappointment mounts after a weekend meeting of the G20 failed to deliver on hopes that the world’s largest countries would increase the IMF’s bailout fund.

Energy prices are slipping along with stocks, although the moves are less than 1% and have done nothing to change the bullish technical outlook. Friday’s commitment of traders report showed that fresh speculative dollars continue to flow into commodities, with certain measure hitting record highs. With record long bets already placed, and energy contracts nearing their 2011 peaks, it seems that a fresh influx of funds may be needed to keep the rally from stalling out.

Headlines from the Middle East have quieted down over the past 24 hours which is helping to allow the brief respite our bull run. Don’t expect the lull to last for too long.